What Is Thinking on the Margin

question 2

Multiple Choice

What is thinking on the margin?

• A) Making decisions that are of noneconomic importance.
• B) Making choices that are based on historical precedents.
• C) Making choices that ignore the marginal benefits, but not the marginal costs, of some activity.
• D) Making choices by comparing the additional benefits and additional costs from doing a little bit more of some activity.

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Definitions:

Marginal Propensity

The tendency of an individual or population to consume or save an extra unit of income.

Lump-Sum Taxes

Taxes that are a fixed amount, not varying with the income or wealth of the taxpayer, and are paid at one time instead of in installments.

Budget Deficit

A situation where a government's expenditures exceed its revenues during a specified period of time, leading to borrowing or debt accumulation.

Discretionary Fiscal Policy

Government policy involving the use of government spending and taxation levels to influence the economy, based on current conditions.